TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-08-00430-CV
David Wilbourne and Barbara Wilbourne, Appellants
v.
HFE Development Corporation, Don F. Holley, and Barbara Holley, Appellees
FROM THE DISTRICT COURT OF LLANO COUNTY, 424TH JUDICIAL DISTRICT
NO. 15,490, HONORABLE DANIEL H. MILLS, JUDGE PRESIDING
M E M O R A N D U M O P I N I O N
This appeal grew out of a judgment that appellants David Wilbourne and
Barbara Wilbourne obtained against Don F. Holley, Barbara Holley, and HFE Development
Corporation ("HFE") in 2003. The 2003 judgment awarded the Wilbournes $136,018.60 in actual
damages, plus pre- and post-judgment interest, $127,084.91 in attorney's fees, and an additional
$10,000 in attorney's fees in the event of an appeal. The Holleys and HFE unsuccessfully appealed
the 2003 judgment to this Court, posting a supersedeas bond in the amount of $100,000. After the
2003 judgment became final, the Holleys filed for bankruptcy. Thereafter, the Holleys and HFE
initiated this declaratory-judgment suit in Llano County district court for a judicial determination of
their remaining liability to the Wilbournes in light of the bankruptcy proceedings and the payment
from the supersedeas bond. The trial court declared that the total amount of liability remaining is
$52,923.52, plus post-judgment interest at the rate of 10% per annum. The trial court further ordered
that the Wilbournes could recover only from Don Holley, having determined that the judgment
against Barbara Holley and HFE was discharged in bankruptcy.
On appeal, the Wilbournes argue that the trial court erred in (1) denying their plea to
the jurisdiction because the Holleys and HFE's suit for declaratory judgment was an impermissible
collateral attack on the 2003 judgment; (2) calculating the amount owed by Don Holley; and
(3) finding that the portion of the 2003 judgment attributable to HFE was discharged in bankruptcy
because HFE never filed for bankruptcy. We will reverse and dismiss.
FACTUAL AND PROCEDURAL BACKGROUND
The Wilbournes filed suit against the Holleys and HFE in 2000, asserting claims for
breach of contract and common-law fraud. (1) The jury returned a verdict favorable to the Wilbournes
and the trial court rendered judgment on the verdict. The multi-part judgment provided that the
Wilbournes should recover:
(1) from HFE:
$136,018.60 in damages (including $41,018.60 for overcharges for labor and
materials and for the non-legal professional fees incurred in discovering and
determining the amounts of these overcharges and $87,500 for failure to
perform the work in a good and workmanlike fashion); $127,084.91 in
attorney's fees; and an additional $10,000 in attorney's fees in the event of
appeal to this Court;
(2) from Don Holley and Barbara Holley, jointly and severally:
$41,018.60 in damages for overcharges for labor and materials and for the
non-legal professional fees incurred in discovering and determining the
amounts of these overcharges; and
(3) from Don Holley, individually:
$136,018.60 in damages (including $41,018.60 for overcharges for labor and
materials and for the non-legal professional fees incurred in discovering and
determining the amounts of these overcharges and $87,500 for failure to
perform the work in a good and workmanlike fashion), plus court costs.
Finally, the judgment provided that the Wilbournes were not entitled to double recovery and limited
their recovery as follows:
[The Wilbournes] may recover [a] total of only $ 41,018.60, plus [interest] set forth
hereinabove, from: (1) [HFE]; and/or (2) Don Holley and Barbara Holley, jointly and
severally; and/or (3) Don Holley, for those damages that the jury found [the
Wilbournes] to have suffered because of the overcharges for labor and materials and
for the non-legal professional fees incurred in discovering and determining the
amounts of these overcharges, for which the jury found: (1) [HFE] liable under a
breach of contract theory; (2) [Don] and Barbara Holley jointly and severally liable
under a fraud theory; and (3) Don Holley individually liable under a fraudulent
misrepresentation theory; and
[The Wilbournes] may recover a total of only $ 87,500.00, plus [interest] set forth
hereinabove, from [HFE] and/or Don Holley, for those damages that the jury found
[the Wilbournes] to have suffered because of the failure to perform the work in a
good and workmanlike fashion and the consequential damages attributable to the
failure to complete the work in a timely fashion, which the jury found [HFE] liable
under a breach of contract theory and Don Holley liable under a fraudulent
misrepresentation theory.
The Holleys and HFE appealed, posting a superseadeas bond in the amount of
$100,000. This Court affirmed the judgment. See HFE Dev. Corp. v. Wilbourne,
No. 03-03-00322-CV, 2004 Tex. App. LEXIS 4714, at *22-23 (Tex. App.--Austin May 27, 2004,
no pet.) (mem. op.).
After the 2003 judgment became final, Don and Barbara Holley filed for chapter 7
bankruptcy in the United States Bankruptcy Court for the Western District of Texas. The bankruptcy
court granted them a discharge on January 18, 2006. Later that year, the Wilbournes filed a
Complaint to Determine Dischargeability of Debt in reference to the 2003 judgment that they
obtained against the Holleys and HFE. The bankruptcy court determined that the portion of the
judgment against Don Holley for fraud--i.e., $41,018.60 plus pre- and post-judgment interest--was
non-dischargeable and that the discharge previously granted did not apply to that portion of the
judgment. The bankruptcy court further found that the remaining portions of the judgment
against Don and Barbara Holley were subject to the January 2006 discharge order and had been
properly discharged.
Thereafter, the Holleys and HFE filed an original petition for declaratory judgment
in district court for the "construction of" the 2003 judgment. See Tex. Civ. Prac. & Rem. Code Ann.
§§ 37.001-.011 (West 2008). Specifically, they sought a declaration that the 2003 judgment is
"unenforceable, discharged and satisfied." They alleged in their petition that the $100,000
supersedeas bond was delivered to the Wilbournes after the 2003 judgment became final and that
any remaining liability had been discharged in the bankruptcy proceedings. In the alternative, they
requested that the court determine the amount of their remaining liability. The Wilbournes answered
and filed a plea to the jurisdiction, arguing that the trial court lacked jurisdiction "to vary or interpret
the previously rendered judgment." After a hearing, the trial court denied their plea to
the jurisdiction.
The trial court held a bench trial on the Holleys and HFE's petition, at which Don
Holley testified that the Wilbournes collected $100,000 from them in 2003, and that he, his wife, and
his company subsequently filed for bankruptcy relief. (2) The main issue in dispute was whether the
$100,000 superseadeas bond could be applied to Don Holley's undischarged debt that was identified
in the bankruptcy court order--i.e., the $41,018.60, plus pre- and post-judgment interest.
The Holleys argued that the funds should be applied to that debt, thereby extinguishing the
2003 judgment in its entirety. The Wilbournes responded that the $100,000 had already been applied
to the judgment before the bankruptcy application was even filed, and that the bankruptcy court
found that Don Holley was still liable for $41,018.60 over and above the amount of the supersedeas
bond that was posted. At the conclusion of the hearing, the court found that the "part of the debt that
previously was paid through that supersedeas bond apparently had no bearing on this matter, so the
Court will recognize that bankruptcy judgment in that amount of money, the $41,000, plus the
interest that's authorized." The trial court also indicated that it would award the Wilbournes
attorney's fees.
These findings were memorialized in the trial court's final order, dated
March 12, 2008. The order stated that "the total amount of liability remaining by Plaintiffs [the
Holleys and HFE] to Defendants [the Wilbournes] is the sum of $52,923.52, as of February 14, 2008,
plus post judgment interest at the rate of 10% per annum from February 14, 2008, until fully paid."
The order further declared that "the liability on the foregoing amount is upon Don Holley solely[,]
and the other Plaintiffs, HFE Development Corporation and Barbara Holley have no liability on the
judgment rendered against them in Cause No. 12,288, in the 33rd Judicial District Court of Llano
County, Texas, on January 15, 2003 as discharged in the United States Bankruptcy Court." The trial
court also awarded the Wilbournes attorney's fees in the amount of $3,500.
On May 1, 2008, the Holleys and HFE filed an application for further relief, see Tex.
Civ. Prac. & Rem. Code Ann. § 37.011, in which they argued that the Wilbournes "refused to accept
the ordered judgment amount," despite Don Holley's attempts to tender "the balance owed on the
judgment." By order dated June 9, 2008, the trial court directed the Wilbournes to accept payment
on the judgment for the amount previously determined in its March 12 order and to execute a release
of judgment. The Wilbournes now appeal from the March 12 order, arguing that the trial court
should have granted their plea to the jurisdiction because the Holleys and HFE's
declaratory-judgment action was an impermissible collateral attack on the 2003 judgment. They
assert in the alternative that the evidence is legally and factually insufficient to support the trial
court's judgment.
STANDARD OF REVIEW
A plea to the jurisdiction challenges the trial court's authority to determine the subject
matter of the action. Texas Dep't of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex.1999). Whether a
trial court has subject-matter jurisdiction and whether a pleader has alleged facts that affirmatively
demonstrate the trial court's subject-matter jurisdiction are questions of law that we review de novo.
Texas Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). When, as here, a
plea to the jurisdiction challenges only the pleadings, we determine if the pleader has met his burden
of alleging facts that affirmatively demonstrate the court's jurisdiction to hear the cause. Id.; see
Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). A trial court must
grant a plea to the jurisdiction when the pleadings fail to state a cause of action over which the trial
court has jurisdiction. Harris County v. Sykes, 136 S.W.3d 635, 639 (Tex. 2003). If, however, the
pleadings--construed liberally in the plaintiffs' favor--neither contain sufficient facts to
affirmatively demonstrate the existence of jurisdiction nor affirmatively demonstrate incurable
defects in jurisdiction, then the plaintiffs should receive an opportunity to amend their pleadings.
See Miranda, 133 S.W.3d at 226-27.
DISCUSSION
In their first issue, the Wilbournes argue that the trial court lacked subject-matter
jurisdiction over this declaratory-judgment action because it represents an impermissible collateral
attack on the 2003 judgment. "Collateral attacks on final judgments are generally disallowed
because it is the policy of the law to give finality to the judgments of the courts." Browning
v. Prostok, 165 S.W.3d 336, 345 (Tex. 2005). "A collateral attack is an attempt to avoid the binding
force of a judgment in a proceeding not instituted for the purpose of correcting, modifying, or
vacating the judgment, but in order to obtain some specific relief which the judgment currently
stands as a bar against." Id. at 346. Only a void judgment may be collaterally attacked. Id.
The Holleys and HFE labeled their pleading as a petition for declaratory judgment.
The purpose of a declaratory-judgment action is to establish existing rights, status, or other legal
relations. Tex. Civ. Prac. & Rem. Code Ann. § 37.002(b) (West 2008). A declaratory judgment is
proper only if a justiciable controversy exists as to the rights and status of the parties and
the controversy will be resolved by the declaration sought. Bonham State Bank v. Beadle,
907 S.W.2d 465, 467 (Tex. 1995); Texas Dep't of Pub. Safety v. Moore, 985 S.W.2d 149, 153 (Tex.
App.--Austin 1998, no pet.). The Holleys and HFE assert that they were entitled to a declaration
that the 2003 judgment was unenforceable because it had been discharged or, in the alternative, a
judicial determination of the effect that the supersedeas bond and the bankruptcy court's discharge
order had on the 2003 judgment. They argue that if the 2003 judgment was not discharged in its
entirety, then the "intervening bankruptcy proceedings made the amount owed by Don Holley
and HFE unclear because the Bankruptcy Court did not address how the payment of the
$100,000 supersedeas bond was applied."
A trial court generally has discretion to enter a declaratory judgment so long as it
will serve a useful purpose or will terminate the controversy between the parties. Beadle,
907 S.W.2d at 468. A declaratory-judgment action cannot be used, however, to have a prior
judgment declared void; this has been held to constitute an impermissible collateral attack. See
Cohen v. Cohen, 632 S.W.2d 172, 173 (Tex. App.--Waco 1992, no writ); Sutherland v. Sutherland,
560 S.W.2d 531, 533 (Tex. Civ. App.--Texarkana 1978, writ ref'd n.r.e.). In Sutherland, the
plaintiff brought a declaratory-judgment suit to "vacate, annul, or hold void a portion" of the parties'
divorce decree, following an unsuccessful collateral attack on the divorce decree by writ of habeas
corpus after he had failed to perfect a direct appeal. 560 S.W.2d at 532-33. In holding that he was
not entitled to pursue the declaratory-judgment action, the court explained that, "[u]nder the
circumstances of this case, the only avenue left open to Mr. Sutherland to set aside that portion of
the divorce decree which he alleges was void, was by bill of review," which was at that point
time-barred. Id. at 533. Similarly, in Cohen, the plaintiff sought a declaration six years after the
divorce decree was rendered that two provisions of the marital property division were void.
632 S.W.2d at 173. The court characterized the suit as an impermissible collateral attack because
it sought to set aside the judgment on a ground other than that the trial court lacked jurisdiction of
the parties or the subject matter, or that the judgment was void on its face. Id. at 174.
Similar considerations are at play when a declaratory judgment is sought not to
declare an earlier judgment void, but to have a court merely "interpret" a prior judgment. See Rapid
Settlements, Ltd. v. SSC Settlements, LLC, 251 S.W.3d 129, 140 (Tex. App.--Tyler 2008,
orig. proceeding) ("Declaratory relief is not available for the interpretation of a prior judgment
entered by that or any other court."); Martin v. Dosohs I, Ltd., 2 S.W.3d 350, 354 (Tex. App.--San
Antonio 1999, pet. denied) ("[T]he use of a declaratory judgment suit to interpret a judgment of the
same or another court is an impermissible collateral attack on the previous judgment."); Cohen,
632 S.W.2d at 173 ("The utilization of a declaratory judgment action is a collateral attack on the
prior judgment and cannot be used for the purpose of asking a trial court to interpret a prior judgment
entered by that or any other court."); Speaker v. Lawler, 463 S.W.2d 741, 742-43 (Tex. Civ.
App.--Beaumont 1971, writ ref'd n.r.e.) ("[A] litigant cannot use [the declaratory judgments act]
for the purpose of asking a trial court to interpret a prior judgment entered by that or another court.").
Texas courts have held that such suits are barred even when the claimants expressly stated that they
were not seeking to declare the prior order void or unenforceable, but instead sought merely to clarify
their rights under it. See Rapid Settlements, 251 S.W.3d at 140; Martin, 2 S.W.3d at 353. As the
supreme court explained in Browning, while the subsequent action often "contemplates relief other
than revoking the [prior] order, it necessarily challenges the integrity of the order and results in a
review, perhaps a recalculation" of the matters at issue in the prior suit. 165 S.W.3d at 347.
One basis for holding that a suit for declaratory judgment to interpret a prior judgment
is barred arises from the plain language of the declaratory judgments act, which does not entitle
parties to seek judicial determination of their rights under a "judgment." As the court explained in
Speaker v. Lawler:
Article 2524-1 [the predecessor to civil practice and remedies code section 37.004]
does not expressly provide for construction of a judgment, and we decline to extend
its provisions by implication. Section 2 of this Act mentions specifically "a deed,
will, written contract, or other writings constituting a contract" and also "Statute,
municipal ordinance, contract, or franchise."[ (3)] We have not been cited, nor have we
found, a single case in Texas brought under this Act for the purpose of interpreting
a judgment.
463 S.W.2d at 742. Yet another concern is that "such procedure would permit a new method of
review of a prior judgment, and a party would be allowed declaratory relief without the
existence of a justiciable controversy already within the court's jurisdiction, resulting in an
impermissible advisory opinion." Martin, 2 S.W.3d at 354 (citing Southwest Airlines Co. v. Texas
High-Speed Rail Auth., 863 S.W.2d 123, 125 (Tex. App.--Austin 1993, writ denied); Speaker,
463 S.W.2d at 742-43).
In an attempt to distinguish their suit, the Holleys and HFE rely on the supreme
court's decision in Bonham State Bank v. Beadle. In Beadle, after the parties obtained judgments
against one another in separate proceedings filed in two different states, the bank filed a
declaratory-judgment action seeking to treat the adverse $75,000 judgment obtained by Beadle as
an offset from its $1,650,000 judgment against him. See 907 S.W.2d at 466-67. Noting cases from
numerous jurisdictions holding that a declaratory-judgment action is an appropriate vehicle for the
offset of two final judgments, the supreme court determined that the situation posed a "bona fide,
concrete controversy ripe for resolution by way of declaratory judgment." Id. at 467. The court gave
considerable weight to the "very real concern that Beadle will be able to collect the $75,000
judgment, while Bonham Bank will be unable to collect its much larger judgment against Beadle,
who may well be without funds to pay Bonham Bank." Id. at 469. To characterize the bank's suit
as one for setoff, rather than a declaratory judgment to interpret a prior judgment, would "save the
oppressive and ruinous sacrifice of property, . . . especially in cases where the insolvency of one of
the parties prevents the possibility of recovery or compensation from him." Id. The Holleys and
HFE urge that the intervention of the bankruptcy proceedings and discharge order present a scenario
much like the offsetting judgments in Beadle. We disagree.
"Beadle applies to situations in which there are two previous, final judgments, held
by each party against the other." Lannie v. Emmons & Jackson, P.C., No. 01-05-01170-CV,
2006 Tex. App. LEXIS 6428, at *9 (Tex. App.--Houston [1st Dist.] 2006, pet. denied) (mem. op.);
see Bonham State Bank, 907 S.W.2d at 468. Here, however, the Holleys and HFE hold no judgment
against the Wilbournes, nor do they assert that they are entitled to recoup any portion of the $100,000
supersedeas bond, or any other amount, against them. Lannie v. Emmons presents a more analogous
case. In Lannie, the appellees obtained a judgment against the appellant, who later filed for
bankruptcy. 2006 Tex. App. LEXIS 6428, at *2-3. The appellees filed a claim against the
bankruptcy estate and made a demand for the amount of the prior judgment that remained unpaid.
Id. at *3. The appellant then filed a declaratory-judgment action in state district court seeking a
judgment "declaring the remaining obligations or indebtedness, if any," owed under the previous
judgment and an accounting of all sums recovered by the appellees. Id. at *4. The First Court of
Appeals held that this was an impermissible collateral attack, distinguishing Beadle in noting that
the prior judgment "and any payments tendered as a result were neither subsequent nor extrinsic to
the judgment such as to entitle Lannie to establish an offset through a declaratory action." Id. at *10
(citing Beadle, 907 S.W.2d at 466-67).
We hold that the Holleys and HFE's declaratory-judgment action for the purpose of
declaring the 2003 judgment "unenforceable, discharged and satisfied" is barred as an impermissible
collateral attack. We further hold that declaratory relief was not appropriate for their remaining
claims seeking to have the court interpret the 2003 judgment and declare the amount of their
remaining liability. We sustain the Wilbournes' first issue and therefore need not reach the
remainder of their issues complaining of the sufficiency of the evidence supporting the trial
court's judgment.
CONCLUSION
The trial court erred in denying the Wilbournes' plea to the jurisdiction. Accordingly,
we reverse the trial court's judgment and dismiss the Holleys and HFE's cause for lack of
subject-matter jurisdiction.
J. Woodfin Jones, Chief Justice
Before Chief Justice Jones, Justices Puryear and Henson
Reversed and Dismissed
Filed: December 9, 2009
1. For a detailed discussion of the facts in the prior litigation, see HFE Dev. Corp.
v. Wilbourne, No. 03-03-00322-CV, 2004 Tex. App. LEXIS 4714 (Tex. App.--Austin
May 27, 2004, no pet.) (mem. op.).
2. We note, however, that Plaintiff's Exhibit 5, a copy of the bankruptcy court's discharge
order, identifies only Don Fred Holley and Barbara Leah Holley as the debtors.
3. The text of the current statute is identical. See Tex. Civ. Prac. & Rem. Code Ann. § 37.004
(West 2008).